U.S. Consumer Prices Unchanged, Underlying Inflation Picking Up

Underlying inflation pressures pushed higher in October, even as falling gasoline prices kept overall U.S. consumer prices in check.

The Labor Department said on Thursday its so-called core Consumer Price Index, which excludes food and energy, rose 0.2 percent, the largest increase in five months, after nudging up 0.1 percent in September.

In the 12 months through October, the core CPI rose 1.8 percent after rising 1.7 percent in September, a sign that a recent disinflationary trend has probably run its course.

However, falling gasoline prices, which offset rising shelter and medical costs, left the overall CPI unchanged last month after a 0.1 percent gain in September.

"The decline in energy prices simply hasn't yet bled through to the core. Inflation, while below the Fed's target, is certainly not "too low," today's flat headline reading furthers the debate surrounding potential Fed activity," said Dan Greenhaus, chief strategist at BTIG in New York.

U.S. stock index futures held their losses on the data, while U.S. Treasury debt prices trimmed gains. The dollar rose against the euro and the yen.

Declining energy and commodity prices against the backdrop of a slowing global economy, and a strengthening dollar are keeping inflation below the Federal Reserve's 2 percent target.

Sluggish wage growth, despite a strengthening labor market is also keeping a lid on inflation.

A second report from the Labor Department showed first-time applications for unemployment benefits fell 2,000 to a seasonally adjusted 291,000 last week, staying below the 300,000 threshold for a 10th straight week.

Minutes of the Fed's Oct. 28-29 meeting published on Wednesday showed most policymakers expect inflation will edge lower in the near-term and subsequently move toward its target.

But there was a bit of concern over falling market-based inflation expectations, with some officials saying they should be monitored for signs of "a possible downward shift in longer-term inflation expectations."

The U.S. central bank has kept its short-term interest rate near zero since December 2008. Most economists expect the first interest rate increase sometime in the mid-2015.

In October, energy prices fell for a fourth straight month, with gasoline prices declining 3.0 percent after dropping 1.0 percent in September. Food prices edged up 0.1 percent after gaining 0.3 percent in September.

Within the core CPI, shelter costs increased 0.2 percent last month after increasing 0.3 percent in September. There were increases in airline fares and new motor vehicle prices as well as prices for prescription medication and hospital fees.

Tobacco prices also rose last month as did household furnishings, which posted their largest gain since November 2012.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)